-- Fourth quarter GAAP net income of $161
million, or $0.79 per diluted share, and full year GAAP net income
of $672 million, or $3.20 per diluted share --
-- Adjusted diluted net operating income per
share for the fourth quarter of $0.86, an increase of 23%
year-over-year, and for the full year of $3.21, an increase of 19%
year-over-year --
-- Writes $71 billion in new MI business for
2019; MI in force increases 9% year-over-year to $241 billion
--
-- Purchases $300 million or 13.5 million
shares of Radian Group common stock in 2019 --
-- In 2020, enhances risk profile and improves
capital position with closing of $488 million ILN transaction;
improves financial flexibility with return of capital from Radian
Reinsurance to Radian Group --
Radian Group Inc. (NYSE: RDN) today reported net income for the
quarter ended December 31, 2019, of $161.2 million, or $0.79 per
diluted share. This compares with net income for the quarter ended
December 31, 2018, of $139.8 million, or $0.64 per diluted
share.
Net income for the full year 2019 was $672.3 million, or $3.20
per diluted share. This compares to net income for the full year
2018 of $606.0 million, or $2.77 per diluted share, which included
a tax benefit of approximately $73.6 million from the impact of the
settlement with the IRS as well as the reversal of certain
previously accrued state and local tax liabilities.
Key Financial Highlights (dollars in millions, except
per-share amounts)
Quarter ended
December 31, 2019
Quarter ended
December 31, 2018
Percent
Change
Net income(1)
$161.2
$139.8
15
%
Diluted net income per share
$0.79
$0.64
23
%
Consolidated pretax income
$205.6
$176.5
16
%
Adjusted pretax operating
income(2)
$224.0
$193.7
16
%
Adjusted diluted net operating
income per share(2)(3)
$0.86
$0.70
23
%
Net premiums earned - mortgage
insurance(4)
$298.5
$259.7
15
%
MI New Insurance Written
(NIW)
$19,953
$12,737
57
%
MI primary insurance in force
$240,558
$221,443
9
%
Book value per share(5)
$20.13
$16.34
23
%
Available holding company
liquidity
$652.6
$714.1
(9
)%
Return on equity(1)(6)
16.2%
16.4%
(1
)%
Adjusted net operating return on
equity (2)
17.8%
17.9%
(1
)%
Year ended
December 31, 2019
Year ended
December 31, 2018
Percent
Change
Net income(1)
$672.3
$606.0
11
%
Diluted net income per share
$3.20
$2.77
16
%
Consolidated pretax income
$849.0
$684.2
24
%
Adjusted pretax operating
income(2)
$854.6
$745.5
15
%
Adjusted diluted net operating
income per share(2)(3)
$3.21
$2.69
19
%
Net premiums earned - mortgage
insurance(4)
$1,134.2
$1,006.7
13
%
MI New Insurance Written
(NIW)
$71,327
$56,547
26
%
Return on equity(1)(6)
17.8%
18.7%
(5
)%
Adjusted net operating return on
equity(2)
17.9%
18.2%
(2
)%
(1)
Net income for the fourth quarter and full
year 2019 includes a pretax net gain on investments and other
financial instruments of $4.3 million and $51.7 million,
respectively, compared to net losses on investments and other
financial instruments for the fourth quarter and full year 2018 of
$11.7 million and $42.5 million, respectively. Net income for the
fourth quarter and full year 2019 also includes a pre-tax, non-cash
impairment of goodwill and other acquired intangible assets of
$18.5 million related to the company's previously announced sale of
Clayton Services in January 2020. Additionally, net income for the
full year 2018 includes the impact of tax benefits of $73.6
million, which includes both the impact of the settlement with the
IRS as well as the reversal of certain previously accrued state and
local tax liabilities.
(2)
Adjusted results, including adjusted
pretax operating income, adjusted diluted net operating income per
share, and adjusted net operating return on equity are non-GAAP
financial measures. For definitions and reconciliations of these
measures to the comparable GAAP measures, see Exhibits F and G.
(3)
Adjusted diluted net operating income per
share is calculated using the company’s statutory tax rate of 21
percent.
(4)
Quarter and year ended December 31, 2019
includes a cumulative impact of $17.4 million related to the
recognition of deferred initial premiums on monthly policies.
(5)
Accumulated other comprehensive income
(loss) impacted book value per share by $0.55 per share as of
December 31, 2019, and $(0.29) per share as of December 31,
2018.
(6)
Calculated by dividing annualized net
income by average stockholders' equity, based on the average of the
beginning and ending balances for each period presented.
Adjusted pretax operating income for the quarter ended December
31, 2019, was $224.0 million, compared to $193.7 million for the
quarter ended December 31, 2018. Adjusted pretax operating income
for the year ended December 31, 2019, was $854.6 million, compared
to $745.5 million for the same period of 2018. Adjusted diluted net
operating income per share for the quarter ended December 31, 2019,
was $0.86, compared to $0.70 for the quarter ended December 31,
2018. Adjusted diluted net operating income per share for the year
ended December 31, 2019, was $3.21, an increase of 19 percent
compared to $2.69 for the same period of 2018.
Book value per share at December 31, 2019, was $20.13, compared
to $19.40 at September 30, 2019, and an increase of 23 percent
compared to $16.34 at December 31, 2018.
“I am pleased to report that 2019 was another outstanding year
for Radian, with net income of $672 million, adjusted pretax
operating income of $855 million, 23% year-over-year growth in book
value and record volume of flow mortgage insurance business for the
fourth consecutive year,” said Radian’s Chief Executive Officer
Rick Thornberry. “We took several steps to execute our capital
strategy and strengthen our risk profile, including returning
capital from our mortgage insurance subsidiaries to Radian Group,
repurchasing shares of common stock, executing a mortgage
insurance-linked notes transaction, reducing our total debt
outstanding, and improving our debt maturity profile."
FOURTH QUARTER AND FULL YEAR HIGHLIGHTS
- NIW was $20.0 billion for the fourth quarter, compared to $22.0
billion in the third quarter of 2019 and $12.7 billion in the
prior-year quarter. NIW was $71.3 billion for the full year 2019,
an increase of 26 percent compared to $56.5 billion for the prior
year.
- NIW for the full year 2019 represented record volume written on
a flow basis for the company.
- Of the $20.0 billion in NIW in the fourth quarter of 2019, 82
percent was written with monthly and other recurring premiums,
compared to 85 percent in the third quarter of 2019, and 83 percent
in the fourth quarter of 2018.
- Borrower-paid originations accounted for 97 percent of total
NIW in the fourth quarter of 2019, compared to 97 percent in the
third quarter of 2019, and 94 percent in the fourth quarter of
2018.
- Refinances accounted for 33 percent of total NIW in the fourth
quarter of 2019, compared to 19 percent in the third quarter of
2019, and 5 percent in the fourth quarter of 2018.
- Total primary mortgage insurance in force as of December 31,
2019, grew to $240.6 billion, an increase of 1 percent compared to
$237.2 billion as of September 30, 2019, and an increase of 9
percent compared to $221.4 billion as of December 31, 2018.
- Radian's mortgage insurance portfolio consists of 95 percent of
new business written after 2008, including those loans that
successfully completed the Home Affordable Refinance Program
(HARP).
- Persistency, which is the percentage of mortgage insurance that
remains in force after a twelve-month period, was 78.2 percent for
the twelve months ended December 31, 2019, compared to 81.5 percent
for the twelve months ended September 30, 2019 and 83.1 percent for
the twelve months ended December 31, 2018.
- Annualized persistency for the three months ended December 31,
2019, was 75.0 percent, compared to 75.5 percent for the three
months ended September 30, 2019, and 85.5 percent for the three
months ended December 31, 2018.
- Net mortgage insurance premiums earned were $298.5 million for
the quarter ended December 31, 2019, compared to $277.6 million for
the quarter ended September 30, 2019, and $259.7 million for the
quarter ended December 31, 2018. Net mortgage insurance premiums
earned were $1.1 billion for the year ended December 31, 2019,
compared to $1.0 billion for the year ended December 31, 2018.
- During the fourth quarter 2019, earned premiums were positively
impacted by $17.4 million for the cumulative recognition of
deferred initial premiums on monthly policies.
- Mortgage insurance in force portfolio premium yield was 50.0
basis points in the fourth quarter of 2019, or 47.1 basis points
excluding the impact of the premium adjustment described above.
This compares to 47.4 basis points in the third quarter of 2019 and
49.0 basis points in the fourth quarter of 2018.
- The impact of single premium cancellations before consideration
of reinsurance represented 4.4 basis points of direct premium yield
in the fourth quarter of 2019, 4.6 basis points in the third
quarter of 2019, and 1.7 basis points in the fourth quarter of
2018.
- Total net mortgage insurance premium yield, which includes the
impact of ceded premiums and accrued profit commission, was 50.0
basis points in the fourth quarter of 2019, or 47.1 basis points
excluding the impact of the premium adjustment described above.
This compares to 47.5 basis points in the third quarter of 2019,
and 47.4 basis points in the fourth quarter of 2018.
- Additional details regarding premiums earned may be found in
Exhibit D.
- The mortgage insurance provision for losses was $34.4 million
in the fourth quarter of 2019, compared to $29.1 million in the
third quarter of 2019, and $27.1 million in the fourth quarter of
2018. The mortgage insurance provision for losses was $131.5
million for the year ended December 31, 2019, compared to $104.5
million for the year ended December 31, 2018.
- The number of primary delinquent loans was 21,266 as of
December 31, 2019, an increase of 5 percent compared to 20,184 as
of September 30, 2019 and an increase of 1 percent compared to
21,093 as of December 31, 2018.
- The primary mortgage insurance delinquency rate was 2.0 percent
in the fourth quarter of 2019, compared to 1.9 percent in the third
quarter of 2019, and 2.1 percent in the fourth quarter of
2018.
- The loss ratio in the fourth quarter was 11.5 percent, compared
to 10.5 percent in the third quarter of 2019 and 10.4 percent in
the fourth quarter of 2018.
- Mortgage insurance loss reserves were $401.3 million as of
December 31, 2019, compared to $394.1 million as of September 30,
2019, and $397.9 million as of December 31, 2018.
- Total mortgage insurance claims paid were $28.5 million in the
fourth quarter, compared to $36.7 million in the third quarter of
2019, and $39.7 million in the fourth quarter of 2018. Excluding
the impact of commutations and captive terminations, claims paid
were $24.8 million in the fourth quarter of 2019, compared to $29.9
million in the third quarter of 2019 and $35.4 million in the
fourth quarter of 2018. For the full year 2019, total net claims
paid were $132.2 million, compared to $215.9 million for the full
year 2018. In addition, the company’s pending claim inventory
declined 15 percent from the fourth quarter of 2018.
- Total Services Segment revenues for the fourth quarter were
$44.0 million, compared to $47.4 million for the third quarter of
2019, and $41.5 million for the fourth quarter of 2018. Total
revenues for the full year 2019 were $170.4 million, compared to
$157.1 million for the same period of 2018. Adjusted earnings
before interest, income taxes, depreciation and amortization
(Services adjusted EBITDA) for the quarter ended December 31, 2019
was $2.2 million, compared to $3.7 million for the quarter ended
September 30, 2019, and $3.2 million for the quarter ended December
31, 2018. Services adjusted EBITDA for the full year 2019 was $6.4
million, compared to $6.2 million for the prior year period.
Additional details regarding the non-GAAP measure Services adjusted
EBITDA may be found in Exhibits F and G.
- The company recorded a pre-tax, non-cash impairment of goodwill
and other acquired intangible assets in the fourth quarter of 2019
of $18.5 million related to its previously announced sale of
Clayton Services, which closed on January 21, 2020. The sale is not
expected to have a material net impact on Radian's future financial
results.
- Other operating expenses were $80.9 million in the fourth
quarter of 2019, compared to $76.4 million in the third quarter of
2019, and $77.3 million in the fourth quarter of 2018. Other
operating expenses were $306.1 million for the year ended December
31, 2019, compared to $280.8 million for the year ended December
31, 2018.
- The increase in the fourth quarter of 2019, compared to the
fourth quarter of 2018, was driven primarily by increased incentive
compensation expense based on 2019 performance.
- The increase for the full year 2019, compared to the full year
2018, was driven primarily by increased compensation expense,
including performance-based incentive awards, as well as ongoing
investments in our technology systems.
CAPITAL AND LIQUIDITY UPDATE
The company remains focused on optimizing its capital position,
enhancing its return on capital, and increasing its financial
flexibility.
Radian Group
- As of December 31, 2019, Radian Group maintained $652.6 million
of available liquidity. Total liquidity, which includes the
company’s $267.5 million unsecured revolving credit facility, was
$920.1 million as of December 31, 2019.
- During the fourth quarter of 2019, Radian repurchased
approximately 1.1 million shares, or approximately $25 million of
Radian Group common stock, including commissions. For the full year
2019, the company repurchased 13.5 million shares of Radian Group
common stock at a total cost of $300.2 million, including
commissions. In addition, in January 2020, the company purchased an
additional 381,331 shares, or approximately $9.4 million of Radian
Group common stock, including commissions. As of January 31, 2020,
purchase authority of up to $140.6 million remained available under
this program.
- After consideration of the shares repurchased after quarter end
and the net impact of the intercompany capital actions described
below, Radian Group’s available liquidity would have increased by
approximately $256 million relative to the amount as of December
31, 2019.
Radian Guaranty and Radian Reinsurance
- At December 31, 2019, Radian Guaranty’s Available Assets under
the current PMIERs financial requirements totaled approximately
$3.6 billion, resulting in excess available resources or a
“cushion” of $822 million, or 29%, over its Minimum Required Assets
of $2.8 billion.
- The company continues to focus on effectively managing its
capital position in a cost-efficient manner, improving its return
on capital and proactively managing the retained mix of
single-premium business in its total MI portfolio. In January 2020,
Radian Guaranty entered into a new quota share reinsurance
arrangement for single-premium MI business (Single Premium QSR)
with a panel of eight third-party reinsurance providers in order to
cede new single-premium MI business. The terms of the new Single
Premium QSR include a 65 percent cession of business written in
2020 and 2021. Other terms of the new arrangement are also similar
to those in the company's existing 2018 Single Premium QSR
transaction. The company's related PMIERs credit under this new
program remains subject to GSE approval.
- As previously announced, in February 2020, Radian Guaranty
entered into its third fully collateralized mortgage
insurance-linked note (ILN) transaction, in which the company
obtained $488 million of credit risk protection from Eagle Re
2020-1 Ltd. (Eagle Re) through the issuance by Eagle Re of ILNs to
eligible third-party capital markets investors in an unregistered
private offering. Eagle Re is a special purpose insurer domiciled
in Bermuda and is not a subsidiary or affiliate of Radian
Guaranty.
- In connection with the company’s plan to streamline operations
and reposition capital by eliminating the intercompany reinsurance
agreement between Radian Guaranty and Radian Reinsurance, another
MI subsidiary of Radian Group, the Pennsylvania Insurance
Department approved the following actions during the first quarter
of 2020:
- the termination of the intercompany reinsurance agreement,
resulting in the transfer of $6.0 billion in risk in force from
Radian Reinsurance to Radian Guaranty;
- a $465 million return of capital from Radian Reinsurance to
Radian Group, which was paid on January 31, 2020, from Radian
Reinsurance’s gross paid in and contributed surplus; and
- the transfer of $200 million of cash and marketable securities
from Radian Group to Radian Guaranty in exchange for a surplus
note. The intercompany surplus note has a 3 percent interest rate
and a stated maturity of January 31, 2030. The surplus note may be
redeemed at any time upon 30 days prior notice, subject to the
approval of the Pennsylvania Insurance Department.
- After consideration of the ILN transaction and the net impact
of the intercompany capital actions described above, Radian
Guaranty’s excess of Available Assets over its Minimum Required
Assets or "cushion" under PMIERs would have increased to
approximately $935 million or 32 percent as of December 31, 2019,
as compared to the $822 million or 29 percent reported above.
CONFERENCE CALL
Radian will discuss fourth quarter and year-end 2019 financial
results in a conference call tomorrow, Thursday, February 6, 2020,
at 10:00 a.m. Eastern time. The conference call will be broadcast
live over the Internet at http://www.radian.biz/page?name=Webcasts
or at www.radian.biz. The call may also be accessed by dialing
877.692.8955 inside the U.S., or 234.720.6979 for international
callers, using passcode 147628 by referencing Radian.
A replay of the webcast will be available on the Radian website
approximately two hours after the live broadcast ends for a period
of one year. A replay of the conference call will be available
approximately two and a half hours after the call ends for a period
of two weeks, using the following dial-in numbers and passcode:
866.207.1041 inside the U.S., or 402.970.0847 for international
callers, passcode 6489036.
In addition to the information provided in the company's
earnings news release, other statistical and financial information,
which is expected to be referred to during the conference call,
will be available on Radian's website under Investors >
Quarterly Results, or by clicking on
http://www.radian.biz/page?name=QuarterlyResults.
NON-GAAP FINANCIAL MEASURES
Radian believes that adjusted pretax operating income, adjusted
diluted net operating income per share and adjusted net operating
return on equity (non-GAAP measures) facilitate evaluation of the
company’s fundamental financial performance and provide relevant
and meaningful information to investors about the ongoing operating
results of the company. On a consolidated basis, these measures are
not recognized in accordance with accounting principles generally
accepted in the United States of America (GAAP) and should not be
considered in isolation or viewed as substitutes for GAAP measures
of performance. The measures described below have been established
in order to increase transparency for the purpose of evaluating the
company’s operating trends and enabling more meaningful comparisons
with Radian’s competitors.
Adjusted pretax operating income is defined as earnings
excluding the impact of certain items that are not viewed as part
of the operating performance of the company’s primary activities,
or not expected to result in an economic impact equal to the amount
reflected in pretax income. Adjusted pretax operating income
adjusts GAAP pretax income to remove the effects of: (i) net gains
(losses) on investments and other financial instruments; (ii) loss
on extinguishment of debt; (iii) amortization and impairment of
goodwill and other acquired intangible assets; and (iv) impairment
of other long-lived assets and other non-operating items, such as
losses from the sale of lines of business and acquisition-related
expenses. Adjusted diluted net operating income per share
represents a diluted net income per share calculation using as its
basis adjusted pretax operating income, net of taxes at the
company’s statutory tax rate for the period. Adjusted net operating
return on equity is calculated by dividing annualized adjusted
pretax operating income, net of taxes computed using the company's
statutory tax rate, by average stockholders' equity, based on the
average of the beginning and ending balances for each period
presented.
The company has also presented a non-GAAP measure for tangible
book value per share, which represents book value per share less
the per-share impact of goodwill and other acquired intangible
assets, net. The company uses this measure to assess the quality
and growth of its capital. Because tangible book value per share is
a widely used financial measure which focuses on the underlying
fundamentals of the company’s financial position and operating
trends without the impact of goodwill and other acquired intangible
assets, the company believes that current and prospective investors
may find it useful in their analysis.
In addition to the above non-GAAP measures for the consolidated
company, the company also presents as supplemental information a
non-GAAP measure for the Services segment, representing earnings
before interest, income tax provision (benefit), depreciation and
amortization (EBITDA). Services adjusted EBITDA is calculated by
using the Services segment’s adjusted pretax operating income as
described above, further adjusted to remove the impact of
depreciation and corporate allocations for interest and operating
expenses. In addition, Services adjusted EBITDA margin is
calculated by dividing Services adjusted EBITDA by GAAP total
revenue for the Services segment. Services adjusted EBITDA and
Services adjusted EBITDA margin are used to facilitate comparisons
with other services companies, since they are widely accepted
measures of performance in the services industry and are used
internally as supplemental measures to evaluate the performance of
our Services segment.
See Exhibit F or Radian’s website for a description of these
items, as well as Exhibit G for reconciliations to the most
comparable consolidated GAAP measures.
ABOUT RADIAN
Radian is ensuring the American dream of homeownership
responsibly and sustainably through products and services that
include industry-leading mortgage insurance and a comprehensive
suite of mortgage, risk, real estate, and title services. We are
powered by technology, informed by data and driven to deliver new
and better ways to transact and manage risk. Learn more about
Radian’s financial strength and flexibility at www.radian.biz and
visit www.radian.com to see how Radian is shaping the future of
mortgage and real estate services.
FINANCIAL RESULTS AND SUPPLEMENTAL INFORMATION CONTENTS
(Unaudited)
For historical trend information, refer to Radian’s quarterly
financial statistics at
http://www.radian.biz/page?name=FinancialReportsCorporate.
Exhibit A:
Condensed Consolidated Statements of
Operations Trend Schedule
Exhibit B:
Net Income Per Share Trend Schedule
Exhibit C:
Condensed Consolidated Balance Sheets
Exhibit D:
Net Premiums Earned - Insurance
Exhibit E:
Segment Information
Exhibit F:
Definition of Consolidated Non-GAAP
Financial Measures
Exhibit G:
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit H:
Mortgage Insurance Supplemental
Information
New Insurance Written
Exhibit I:
Mortgage Insurance Supplemental
Information
Primary Insurance in Force and Risk in
Force
Exhibit J:
Mortgage Insurance Supplemental
Information
Claims and Reserves
Exhibit K:
Mortgage Insurance Supplemental
Information
Default Statistics
Exhibit L:
Mortgage Insurance Supplemental
Information
Reinsurance Programs
Radian Group Inc. and SubsidiariesCondensed Consolidated
Statements of Operations Trend ScheduleExhibit A (page 1 of 2)
2019
2018
(In thousands,
except per-share amounts)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Revenues:
Net premiums earned - insurance
$
301,486
$
281,185
$
299,166
$
263,512
$
261,682
Services revenue
40,031
42,509
39,303
32,753
38,414
Net investment income
41,432
42,756
43,761
43,847
42,051
Net gains (losses) on investments and
other financial instruments
4,257
13,009
12,540
21,913
(11,705
)
Other income
818
879
194
1,604
1,031
Total revenues
388,024
380,338
394,964
363,629
331,473
Expenses:
Provision for losses
34,619
29,231
47,427
20,754
27,140
Policy acquisition costs
6,783
6,435
6,203
5,893
6,485
Cost of services
27,278
29,044
27,845
24,157
24,939
Other operating expenses
80,894
76,384
70,046
78,805
77,266
Restructuring and other exit
costs
—
—
—
—
113
Interest expense
12,160
13,492
14,961
15,697
15,584
Loss on extinguishment of debt
—
5,940
16,798
—
—
Impairment of goodwill
4,828
—
—
—
—
Amortization and impairment of other
acquired intangible assets
15,823
2,139
2,139
2,187
3,461
Total expenses
182,385
162,665
185,419
147,493
154,988
Pretax income
205,639
217,673
209,545
216,136
176,485
Income tax provision
44,455
44,235
42,815
45,179
36,706
Net income
$
161,184
$
173,438
$
166,730
$
170,957
$
139,779
Diluted net income per share
$
0.79
$
0.83
$
0.78
$
0.78
$
0.64
Radian Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations Exhibit A (page 2
of 2)
Year Ended December
31,
(In thousands,
except per-share amounts)
2019
2018
Revenues:
Net premiums earned - insurance
$
1,145,349
$
1,014,007
Services revenue
154,596
144,972
Net investment income
171,796
152,475
Net gains (losses) on investments and
other financial instruments
51,719
(42,476
)
Other income
3,495
4,028
Total revenues
1,526,955
1,273,006
Expenses:
Provision for losses
132,031
104,641
Policy acquisition costs
25,314
25,265
Cost of services
108,324
98,124
Other operating expenses
306,129
280,818
Restructuring and other exit
costs
—
6,053
Interest expense
56,310
61,490
Loss on extinguishment of debt
22,738
—
Impairment of goodwill
4,828
—
Amortization and impairment of other
intangible assets
22,288
12,429
Total expenses
677,962
588,820
Pretax income
848,993
684,186
Income tax provision
176,684
78,175
Net income
$
672,309
$
606,011
Diluted net income per share
$
3.20
$
2.77
Radian Group Inc. and Subsidiaries Net
Income Per Share Trend Schedule Exhibit B
The calculation of basic and diluted
net income per share was as follows:
2019
2018
(In thousands,
except per-share amounts)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net income —basic and diluted
$
161,184
$
173,438
$
166,730
$
170,957
$
139,779
Average common shares
outstanding—basic
203,431
203,107
208,097
213,537
213,435
Dilutive effect of stock-based
compensation arrangements (1)
1,734
5,584
5,506
4,806
4,448
Adjusted average common shares
outstanding—diluted
205,165
208,691
213,603
218,343
217,883
Basic net income per share
$
0.79
$
0.85
$
0.80
$
0.80
$
0.65
Diluted net income per share
$
0.79
$
0.83
$
0.78
$
0.78
$
0.64
(1)
The following number of shares of our
common stock equivalents issued under our share-based compensation
arrangements were not included in the calculation of diluted net
income per share because they were anti-dilutive:
2019
2018
(In
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Shares of common stock
equivalents
—
—
168
169
337
Year Ended December
31,
(In thousands,
except per-share amounts)
2019
2018
Net income - basic and diluted
$
672,309
$
606,011
Average common shares
outstanding—basic
208,773
214,267
Dilutive effect of stock-based
compensation arrangements (1)
1,567
4,286
Adjusted average common shares
outstanding—diluted
210,340
218,553
Basic net income per share
$
3.22
$
2.83
Diluted net income per share
$
3.20
$
2.77
(1)
The following number of shares of our
common stock equivalents issued under our share-based compensation
arrangements were not included in the calculation of diluted net
income per share because they were anti-dilutive:
Year Ended December
31,
(In
thousands)
2019
2018
Shares of common stock
equivalents
221
337
Radian Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets Exhibit C
December 31,
September 30,
June 30,
March 31,
December 31,
(In thousands,
except per-share amounts)
2019
2019
2019
2019
2018
Assets:
Investments
$
5,658,747
$
5,533,724
$
5,513,319
$
5,475,770
$
5,153,029
Cash
92,729
49,393
74,111
118,668
95,393
Restricted cash
3,545
2,853
5,007
9,086
11,609
Accounts and notes receivable
93,630
144,113
122,104
89,237
78,652
Deferred income taxes, net
—
—
6,872
67,697
131,643
Goodwill and other acquired intangible
assets, net
28,187
52,533
54,672
56,811
58,998
Prepaid reinsurance premium
363,856
374,339
385,805
408,622
417,628
Other assets
567,619
513,647
430,236
373,678
367,700
Total assets
$
6,808,313
$
6,670,602
$
6,592,126
$
6,599,569
$
6,314,652
Liabilities and stockholders’
equity:
Unearned premiums
$
626,822
$
647,856
$
666,354
$
720,159
$
739,357
Reserve for losses and loss adjustment
expense
404,765
398,141
405,278
388,784
401,361
Senior notes
887,110
886,643
982,890
1,031,197
1,030,348
FHLB advances
134,875
104,492
106,382
108,532
82,532
Reinsurance funds withheld
291,829
352,532
339,641
329,868
321,212
Other liabilities
414,189
358,431
308,337
310,938
251,127
Total liabilities
2,759,590
2,748,095
2,808,882
2,889,478
2,825,937
Common stock
219
220
223
230
231
Treasury stock
(901,657
)
(901,556
)
(901,419
)
(895,321
)
(894,870
)
Additional paid-in capital
2,449,884
2,469,097
2,539,803
2,697,724
2,724,733
Retained earnings
2,389,789
2,229,107
2,056,175
1,889,964
1,719,541
Accumulated other comprehensive income
(loss)
110,488
125,639
88,462
17,494
(60,920
)
Total stockholders’ equity
4,048,723
3,922,507
3,783,244
3,710,091
3,488,715
Total liabilities and stockholders’
equity
$
6,808,313
$
6,670,602
$
6,592,126
$
6,599,569
$
6,314,652
Shares outstanding
201,164
202,219
205,399
212,136
213,473
Book value per share
$
20.13
$
19.40
$
18.42
$
17.49
$
16.34
Tangible book value per share (See
Exhibit G)
$
19.99
$
19.14
$
18.15
$
17.22
$
16.06
Debt to capital ratio (1)
18.0
%
18.4
%
20.6
%
21.7
%
22.8
%
Risk to capital ratio-Radian Guaranty
only
13.6
:1
14.2
:1
14.6
:1
13.4
:1
13.9
:1
Risk to capital ratio-Mortgage
Insurance combined
12.3
:1
12.9
:1
13.3
:1
12.4
:1
12.8
:1
(1)
Calculated as senior notes divided by
senior notes and stockholders' equity.
Radian Group Inc. and Subsidiaries Net
Premiums Earned - Insurance Exhibit D (page 1 of 2)
2019
2018
(In
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Premiums earned - insurance:
Direct - Mortgage Insurance
Premiums earned, excluding revenue from
cancellations
$
295,845
(1)
$
274,595
$
315,109
(2)
$
268,496
$
266,536
(3)
Single Premium Policy
cancellations
26,479
27,254
15,793
9,957
9,320
Total direct - Mortgage
Insurance
322,324
(1)
301,849
330,902
(2)
278,453
275,856
Assumed - Mortgage Insurance: (1)
(4)
2,837
2,614
2,481
2,450
2,082
(3)
Ceded - Mortgage Insurance:
Premiums earned, excluding revenue from
cancellations
(28,055
)
(28,457
)
(53,948
)
(2)
(24,486
)
(23,573
)
Single Premium Policy cancellations
(5)
(7,843
)
(8,137
)
(4,833
)
(2,953
)
(3,091
)
Profit commission - other (6)
9,241
9,729
21,732
(2)
8,314
8,447
Total ceded premiums, net of profit
commission - Mortgage Insurance (7)
(26,657
)
(26,865
)
(37,049
)
(2)
(19,125
)
(18,217
)
Net premiums earned - insurance -
Mortgage Insurance
298,504
(1)
277,598
296,334
(2)
261,778
259,721
Net premiums earned - insurance -
Services
2,982
3,587
2,832
1,734
1,961
Net premiums earned - insurance
$
301,486
(1)
$
281,185
$
299,166
(2)
$
263,512
$
261,682
(1)
Includes a cumulative impact related to
the recognition of deferred initial premiums on monthly
policies.
(2)
Includes a cumulative adjustment to
unearned premiums related to an update to the amortization rates
used to recognize revenue for Single Premium Policies.
(3)
2018 has been reclassified to conform
to current period presentation.
(4)
Includes premiums earned from our
participation in certain credit risk transfer programs.
(5)
Includes the impact of related profit
commissions.
(6)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(7)
See Exhibit L for additional
information on ceded premiums for our various reinsurance
programs.
Radian Group Inc. and Subsidiaries Net
Premiums Earned - Insurance Exhibit D (page 2 of 2)
Year Ended December
31,
(In
thousands)
2019
2018
Premiums earned - insurance:
Direct - Mortgage Insurance
Premiums earned, excluding revenue from
cancellations
$
1,154,045
(1) (2)
$
1,018,874
(3)
Single Premium Policy
cancellations
79,483
47,990
Total direct - Mortgage
Insurance
1,233,528
(1) (2)
1,066,864
Assumed - Mortgage Insurance:
(4)
10,382
6,904
(3)
Ceded - Mortgage Insurance:
Premiums earned, excluding revenue from
cancellations
(134,946
)
(2)
(85,357
)
Single Premium Policy cancellations
(5)
(23,766
)
(13,726
)
Profit commission - other (6)
49,016
(2)
32,036
Total ceded premiums, net of profit
commission - Mortgage Insurance (7)
(109,696
)
(2)
(67,047
)
Net premiums earned - insurance -
Mortgage Insurance
1,134,214
(1) (2)
1,006,721
Net premiums earned - insurance -
Services
11,135
7,286
Net premiums earned - insurance
$
1,145,349
(1) (2)
$
1,014,007
(1)
Includes a cumulative impact related to
the recognition of deferred initial premiums on monthly
policies.
(2)
Includes a cumulative adjustment to
unearned premiums related to an update to the amortization rates
used to recognize revenue for Single Premium Policies.
(3)
2018 has been reclassified to conform
to current period presentation.
(4)
Includes premiums earned from our
participation in certain credit risk transfer programs.
(5)
Includes the impact of related profit
commissions.
(6)
The amounts represent the profit
commission on the Single Premium QSR Program, excluding the impact
of Single Premium Policy cancellations.
(7)
See Exhibit L for additional
information on ceded premiums for our various reinsurance
programs.
Radian Group Inc. and Subsidiaries
Segment Information Exhibit E (page 1 of 4)
Summarized financial information
concerning our operating segments as of and for the periods
indicated is as follows. For a definition of adjusted pretax
operating income and Services adjusted EBITDA, along with
reconciliations to consolidated GAAP measures, see Exhibits F and
G.
Mortgage Insurance
2019
2018
(In
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums written - insurance
(1)
$
287,952
(2)
$
270,567
$
265,345
$
251,586
$
247,256
(Increase) decrease in unearned
premiums
10,552
7,031
30,989
(3)
10,192
12,465
Net premiums earned - insurance
298,504
277,598
296,334
261,778
259,721
Net investment income
41,288
42,579
43,584
43,665
41,875
Other income
818
879
602
1,196
641
Total
340,610
321,056
340,520
306,639
302,237
Provision for losses
34,411
29,053
47,165
20,844
27,079
Policy acquisition costs
6,783
6,435
6,203
5,893
6,485
Other operating expenses before
corporate allocations (4)
32,755
31,149
28,438
30,410
37,070
Total (5)
73,949
66,637
81,806
57,147
70,634
Adjusted pretax operating income before
corporate allocations
266,661
254,419
258,714
249,492
231,603
Allocation of corporate operating
expenses
27,394
26,671
24,388
25,625
21,627
Allocation of interest expense
12,160
13,492
14,961
15,697
11,133
Adjusted pretax operating
income
$
227,107
$
214,256
$
219,365
$
208,170
$
198,843
Services
2019
2018
(In
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net premiums earned - insurance
$
2,982
$
3,587
$
2,832
$
1,734
$
1,961
Services revenue (5)
40,912
43,614
40,380
33,723
39,006
Net investment income
144
177
177
182
176
Other income
—
—
(408
)
408
390
Total
44,038
47,378
42,981
36,047
41,533
Provision for losses
238
211
318
(18
)
113
Cost of services
27,488
29,162
28,015
24,559
25,064
Other operating expenses before
corporate allocations (4)
14,976
15,176
14,204
13,435
13,719
Restructuring and other exit costs
(4)
—
—
—
—
113
Total
42,702
44,549
42,537
37,976
39,009
Adjusted pretax operating income before
corporate allocations (6)
1,336
2,829
444
(1,929
)
2,524
Allocation of corporate operating
expenses
4,460
4,342
3,970
4,171
3,232
Allocation of interest expense
—
—
—
—
(7)
4,451
Adjusted pretax operating income
(loss)
$
(3,124
)
$
(1,513
)
$
(3,526
)
$
(6,100
)
$
(5,159
)
(1)
Net of ceded premiums written under the
QSR Programs and the Excess-of-Loss Program. See Exhibit L for
additional information.
See notes continued on next page. Radian Group Inc. and
SubsidiariesSegment InformationExhibit E (page 2 of 4)
Notes continued from prior page.
(2)
Includes a cumulative impact related to the recognition of
deferred initial premiums on monthly policies.
(3)
Includes a cumulative adjustment to unearned premiums related to
an update to the amortization rates used to recognize revenue for
Single Premium Policies.
(4)
Does not include impairment of long-lived assets and other
non-operating items, which are not considered components of
adjusted pretax operating income (loss).
(5)
Inter-segment information:
2019
2018
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Inter-segment expense included in
Mortgage Insurance segment
$
881
$
1,105
$
1,077
$
970
$
592
Inter-segment revenue included in
Services segment
881
1,105
1,077
970
592
(6)
Supplemental information for Services
adjusted EBITDA (see definition in Exhibit F):
2019
2018
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Adjusted pretax operating income (loss)
before corporate allocations
$
1,336
$
2,829
$
444
$
(1,929
)
$
2,524
Depreciation and amortization
848
865
976
995
700
Services adjusted EBITDA
$
2,184
$
3,694
$
1,420
$
(934
)
$
3,224
(7)
Effective January 1, 2019, Clayton's
holding company repaid to Radian Group the intercompany note (with
terms consistent with the original issued amount of $300 million
from the Senior Notes due 2019 that were used to fund our purchase
of Clayton), using proceeds from an additional capital contribution
from Radian Group. As a result of the intercompany note repayment,
the Services segment no longer incurs interest expense on the
intercompany note.
Selected Mortgage Insurance
Key Ratios
2019
2018
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Loss ratio (1)
11.5
%
10.5
%
15.9
%
8.0
%
10.4
%
Expense ratio (1)
22.4
%
23.1
%
19.9
%
23.7
%
25.1
%
(1)
Calculated on a GAAP basis using net
premiums earned.
Radian Group Inc. and Subsidiaries
Segment Information Exhibit E (page 3 of 4)
Mortgage Insurance
Year Ended December
31,
(In
thousands)
2019
2018
Net premiums written - insurance
(1)
$
1,075,450
(2)
$
991,021
Decrease in unearned premiums
58,764
(3)
15,700
Net premiums earned - insurance
1,134,214
1,006,721
Net investment income
171,116
152,102
Other income
3,495
2,794
Total
1,308,825
1,161,617
Provision for losses
131,473
104,547
Policy acquisition costs
25,314
25,265
Other operating expenses before
corporate allocations (4)
122,752
135,372
Total (5)
279,539
265,184
Adjusted pretax operating income before
corporate allocations
1,029,286
896,433
Allocation of corporate operating
expenses
104,078
80,134
Allocation of interest expense
56,310
43,685
Adjusted pretax operating
income
$
868,898
$
772,614
Services
Year Ended December
31,
(In
thousands)
2019
2018
Net premiums earned - insurance
$
11,135
$
7,286
Services revenue (5)
158,629
148,217
Net investment income
680
373
Other income
—
1,234
Total
170,444
157,110
Provision for losses
749
408
Cost of services
109,224
98,692
Other operating expenses before
corporate allocations (4)
57,791
53,250
Restructuring and other exit costs
(4)
—
2,100
Total
167,764
154,450
Adjusted pretax operating income (loss)
before corporate allocations (6)
2,680
2,660
Allocation of corporate operating
expenses
16,943
11,974
Allocation of interest expense
—
(7)
17,805
Adjusted pretax operating income
(loss)
$
(14,263
)
$
(27,119
)
(1)
Net of ceded premiums written under the
QSR Programs and the Excess-of-Loss Program. See Exhibit L for
additional information.
(2)
Includes a cumulative impact related to
the recognition of deferred initial premiums on monthly
policies.
(3)
Includes a cumulative adjustment to
unearned premiums related to an update to the amortization rates
used to recognize revenue for Single Premium Policies.
(4)
Does not include impairment of
long-lived assets and other non-operating items, which are not
considered components of adjusted pretax operating income
(loss).
See notes continued on next page. Radian Group Inc. and
SubsidiariesSegment InformationExhibit E (page 4 of 4)
Notes continued from prior
page.
(5)
Inter-segment information:
Year Ended December
31,
2019
2018
Inter-segment expense included in
Mortgage Insurance segment
$
(4,033
)
$
3,245
Inter-segment revenue included in
Services segment
(4,033
)
3,245
(6)
Supplemental information for Services
adjusted EBITDA (see definition in Exhibit F)
Year Ended December
31,
2019
2018
Adjusted pretax operating income (loss)
before corporate allocations
$
2,680
$
2,660
Depreciation and amortization
3,684
3,564
Services adjusted EBITDA
$
6,364
$
6,224
(7)
Effective January 1, 2019, Clayton's
holding company repaid to Radian Group the intercompany note (with
terms consistent with the original issued amount of $300 million
from the Senior Notes due 2019 that were used to fund our purchase
of Clayton), using proceeds from an additional capital contribution
from Radian Group. As a result of the intercompany note repayment,
the Services segment no longer incurs interest expense on the
intercompany note.
Selected Mortgage Insurance
Key Ratios
Year Ended December
31,
2019
2018
Loss ratio (1)
11.6
%
10.4
%
Expense ratio (1)
22.2
%
23.9
%
(1)
Calculated on a GAAP basis using net
premiums earned.
Radian Group Inc. and
Subsidiaries Definition of Consolidated Non-GAAP Financial Measures
Exhibit F (page 1 of 2)
Use of Non-GAAP Financial Measures
In addition to the traditional GAAP financial measures, we have
presented “adjusted pretax operating income,” “adjusted diluted net
operating income per share” and “adjusted net operating
return on equity,” which are non-GAAP financial measures for
the consolidated company, among our key performance indicators to
evaluate our fundamental financial performance. These non-GAAP
financial measures align with the way the Company’s business
performance is evaluated by both management and the board of
directors. These measures have been established in order to
increase transparency for the purposes of evaluating our operating
trends and enabling more meaningful comparisons with our peers.
Although on a consolidated basis “adjusted pretax operating
income,” “adjusted diluted net operating income per share” and
“adjusted net operating return on equity” are
non-GAAP financial measures, we believe these measures aid in
understanding the underlying performance of our operations. Our
senior management, including our Chief Executive Officer (Radian’s
chief operating decision maker), uses adjusted pretax operating
income (loss) as our primary measure to evaluate the fundamental
financial performance of the Company’s business segments and to
allocate resources to the segments.
Adjusted pretax operating income is defined as GAAP consolidated
pretax income (loss), excluding the effects of: (i) net gains
(losses) on investments and other financial instruments; (ii) loss
on extinguishment of debt; (iii) amortization and impairment of
goodwill and other acquired intangible assets; and (iv) impairment
of other long-lived assets and other non-operating items, such as
losses from the sale of lines of business and acquisition-related
expenses. Adjusted diluted net operating income per share is
calculated by dividing (i) adjusted pretax operating income
attributable to common stockholders, net of taxes computed using
the Company’s statutory tax rate, by (ii) the sum of the weighted
average number of common shares outstanding and all dilutive
potential common shares outstanding. Adjusted net operating return
on equity is calculated by dividing annualized adjusted pretax
operating income, net of taxes computed using the Company’s
statutory tax rate, by average stockholders’ equity, based on the
average of the beginning and ending balances for each period
presented.
Although adjusted pretax operating income excludes certain items
that have occurred in the past and are expected to occur in the
future, the excluded items represent those that are: (i) not viewed
as part of the operating performance of our primary activities or
(ii) not expected to result in an economic impact equal to the
amount reflected in pretax income. These adjustments, along with
the reasons for their treatment, are described below.
(1)
Net gains (losses) on investments and
other financial instruments. The recognition of realized investment
gains or losses can vary significantly across periods as the
activity is highly discretionary based on the timing of individual
securities sales due to such factors as market opportunities, our
tax and capital profile and overall market cycles. Unrealized gains
and losses arise primarily from changes in the market value of our
investments that are classified as trading or equity securities.
These valuation adjustments may not necessarily result in realized
economic gains or losses.
Trends in the profitability of our
fundamental operating activities can be more clearly identified
without the fluctuations of these realized and unrealized gains or
losses and changes in fair value of other financial instruments. We
do not view them to be indicative of our fundamental operating
activities.
(2)
Loss on extinguishment of debt. Gains or
losses on early extinguishment of debt and losses incurred to
purchase our debt prior to maturity are discretionary activities
that are undertaken in order to take advantage of market
opportunities to strengthen our financial and capital positions;
therefore, we do not view these activities as part of our operating
performance. Such transactions do not reflect expected future
operations and do not provide meaningful insight regarding our
current or past operating trends. Therefore, these items are
excluded from our calculation of adjusted pretax operating income
(loss).
(3)
Amortization and impairment of goodwill
and other acquired intangible assets. Amortization of acquired
intangible assets represents the periodic expense required to
amortize the cost of acquired intangible assets over their
estimated useful lives. Acquired intangible assets are also
periodically reviewed for potential impairment, and impairment
adjustments are made whenever appropriate. We do not view these
charges as part of the operating performance of our primary
activities.
(4)
Impairment of other long-lived assets and
other non-operating items. Includes activities that we do not view
to be indicative of our fundamental operating activities, such as
(i) losses from the sale of lines of business and (ii)
acquisition-related expenses.
We have also presented a non-GAAP measure for tangible book
value per share, which represents book value per share less the
per-share impact of goodwill and other acquired intangible assets,
net. We use this measure to assess the quality and growth of our
capital. Because tangible book value per share is a widely-used
financial measure which focuses on the underlying fundamentals of
our financial position and operating trends without the impact of
goodwill and other acquired intangible assets, we believe that
current and prospective investors may find it useful in their
analysis of the Company.
In addition to the above non-GAAP measures for the consolidated
company, we also have presented as supplemental information a
non-GAAP measure for our Services segment, representing a measure
of earnings before interest, income tax provision (benefit),
depreciation and amortization (“EBITDA”). We calculate Services
adjusted EBITDA by using adjusted pretax operating income as
described above, further adjusted to remove the impact of
depreciation and corporate allocations for interest and operating
expenses. In addition Services adjusted EBITDA margin is calculated
by dividing Services adjusted EBITDA by GAAP total revenue for the
Services segment. Services adjusted EBITDA and Services adjusted
EBITDA margin are used to facilitate comparisons with other
services companies, since they are widely accepted measures of
performance in the services industry and are used internally as
supplemental measures to evaluate the performance of our Services
segment.
See Exhibit G for the reconciliation of the most comparable GAAP
measures, consolidated pretax income, diluted net income per share,
return on equity and book value per share, to our non-GAAP
financial measures for the consolidated company of adjusted pretax
operating income, adjusted diluted net operating income per share,
adjusted net operating return on equity, and tangible book value
per share, respectively. Exhibit G also contains the reconciliation
of the most comparable GAAP measure, net income, to Services
adjusted EBITDA.
Total adjusted pretax operating income, adjusted diluted net
operating income per share, adjusted net operating return on
equity, tangible book value per share, Services adjusted EBITDA and
Services adjusted EBITDA margin should not be considered in
isolation or viewed as substitutes for GAAP pretax income, diluted
net income per share, return on equity, book value per share or net
income. Our definitions of adjusted pretax operating income,
adjusted diluted net operating income per share, adjusted net
operating return on equity, tangible book value per share, Services
adjusted EBITDA or Services adjusted EBITDA margin may not be
comparable to similarly-named measures reported by other
companies.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G
(page 1 of 6)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
2019
2018
(In
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Consolidated pretax income
$
205,639
$
217,673
$
209,545
$
216,136
$
176,485
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
4,257
13,009
12,540
21,913
(11,705
)
Loss on extinguishment of debt
—
(5,940
)
(16,798
)
—
—
Impairment of goodwill
(4,828
)
—
—
—
—
Amortization and impairment of other
acquired intangible assets
(15,823
)
(2,139
)
(2,139
)
(2,187
)
(3,461
)
Impairment of other long-lived assets
and other non-operating items (1)
(1,950
)
—
103
(5,660
)
(2,033
)
Total adjusted pretax operating income
(2)
$
223,983
$
212,743
$
215,839
$
202,070
$
193,684
(1)
The amounts for all the periods
presented are included in other operating expenses on the Condensed
Consolidated Statement of Operations in Exhibit A and primarily
relate to impairments of other long-lived assets.
(2)
Total adjusted pretax operating income
on a consolidated basis consists of adjusted pretax operating
income (loss) for our Mortgage Insurance segment and our Services
segment, as further detailed in Exhibit E.
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
2019
2018
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Diluted net income per share
$
0.79
$
0.83
$
0.78
$
0.78
$
0.64
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.02
0.06
0.06
0.10
(0.05
)
Loss on extinguishment of debt
—
(0.03
)
(0.08
)
—
—
Impairment of goodwill
(0.02
)
—
—
—
—
Amortization and impairment of other
acquired intangible assets
(0.08
)
(0.01
)
(0.01
)
(0.01
)
(0.02
)
Impairment of other long-lived assets
and other non-operating items
(0.01
)
—
—
(0.02
)
(0.01
)
Income tax (provision) benefit on
reconciling income (expense) items (1)
0.02
—
0.01
(0.01
)
0.02
Difference between statutory and
effective tax rate
—
—
—
(0.01
)
—
Per-share impact of reconciling income
(expense) items
(0.07
)
0.02
(0.02
)
0.05
(0.06
)
Adjusted diluted net operating income
per share (1)
$
0.86
$
0.81
$
0.80
$
0.73
$
0.70
(1)
Calculated using the company’s federal
statutory tax rate of 21%. Any permanent tax adjustments and state
income taxes on these items have been deemed immaterial and are not
included.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G
(page 2 of 6)
Reconciliation of Return on
Equity to Adjusted Net Operating Return on Equity (1)
2019
2018
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Return on equity (1)
16.2
%
18.0
%
17.8
%
19.0
%
16.4
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
0.4
1.4
1.3
2.4
(1.4
)
Loss on extinguishment of debt
—
(0.6
)
(1.8
)
—
—
Impairment of goodwill
(0.5
)
—
—
—
—
Amortization and impairment of other
acquired intangible assets
(1.6
)
(0.2
)
(0.2
)
(0.2
)
(0.4
)
Impairment of other long-lived assets
and other non-operating items
(0.2
)
—
—
(0.6
)
(0.3
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
0.4
(0.1
)
0.1
(0.3
)
0.4
Difference between statutory and
effective tax rate
(0.1
)
0.1
0.2
—
0.2
Impact of reconciling income (expense)
items
(1.6
)
0.6
(0.4
)
1.3
(1.5
)
Adjusted net operating return on
equity
17.8
%
17.4
%
18.2
%
17.7
%
17.9
%
(1)
Calculated by dividing annualized net
income by average stockholders’ equity, based on the average
of the beginning and ending balances for each period
presented.
(2)
Annualized, as a percentage of average
stockholders’ equity.
(3)
Calculated using the company’s
federal statutory tax rate of 21%. Any permanent tax adjustments
and state income taxes on these items have been deemed immaterial
and are not included.
Reconciliation of Book Value
Per Share to Tangible Book Value Per Share (1)
2019
2018
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Book value per share
$
20.13
$
19.40
$
18.42
$
17.49
$
16.34
Less: Goodwill and other acquired
intangible assets, net per share
0.14
0.26
0.27
0.27
0.28
Tangible book value per share
$
19.99
$
19.14
$
18.15
$
17.22
$
16.06
(1)
All book value per share items are
calculated based on the number of shares outstanding at the end of
each respective period.
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G
(page 3 of 6)
Reconciliation of Net Income
to Services Adjusted EBITDA
2019
2018
(In
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net income
$
161,184
$
173,438
$
166,730
$
170,957
$
139,779
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
4,257
13,009
12,540
21,913
(11,705
)
Loss on extinguishment of debt
—
(5,940
)
(16,798
)
—
—
Impairment of goodwill
(4,828
)
—
—
—
—
Amortization and impairment of other
acquired intangible assets
(15,823
)
(2,139
)
(2,139
)
(2,187
)
(3,461
)
Impairment of other long-lived assets
and other non-operating items
(1,950
)
—
103
(5,660
)
(2,033
)
Income tax (provision) benefit
(44,455
)
(44,235
)
(42,815
)
(45,179
)
(36,706
)
Mortgage Insurance adjusted pretax
operating income
227,107
214,256
219,365
208,170
198,843
Services adjusted pretax operating
income (loss)
(3,124
)
(1,513
)
(3,526
)
(6,100
)
(5,159
)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses to Services
(4,460
)
(4,342
)
(3,970
)
(4,171
)
(3,232
)
Allocation of corporate interest
expense to Services
—
—
—
—
(4,451
)
Services depreciation and
amortization
(848
)
(865
)
(976
)
(995
)
(700
)
Services adjusted EBITDA
$
2,184
$
3,694
$
1,420
$
(934
)
$
3,224
Radian Group Inc. and Subsidiaries
Consolidated Non-GAAP Financial Measure Reconciliations Exhibit G
(page 4 of 6)
Reconciliation of Consolidated
Pretax Income to Adjusted Pretax Operating Income
Year Ended December
31,
(In
thousands)
2019
2018
Consolidated pretax income
$
848,993
$
684,186
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
51,719
(42,476
)
Loss on extinguishment of debt
(22,738
)
—
Impairment of goodwill
(4,828
)
—
Amortization and impairment of other
acquired intangible assets
(22,288
)
(12,429
)
Impairment of other long-lived assets
and other non-operating items (1)
(7,507
)
(6,404
)
Total adjusted pretax operating income
(2)
$
854,635
$
745,495
(1)
The amount for the year ended December
31, 2019 primarily relates to impairments of other long-lived
assets and is included in other operating expenses on the
consolidated statement of operations. The amount for the year ended
December 31, 2018 includes $1.6 million and $3.9 million of other
operating expenses and restructuring and other exit costs,
respectively, as classified on the Condensed Consolidated Statement
of Operations in Exhibit A.
(2)
Total adjusted pretax operating income
on a consolidated basis consists of adjusted pretax operating
income (loss) for our Mortgage Insurance segment and our Services
segment, as further detailed in Exhibit E.
Reconciliation of Diluted Net
Income Per Share to Adjusted Diluted Net Operating Income Per
Share
Year Ended December
31,
2019
2018
Diluted net income per share
$
3.20
$
2.77
Less per-share impact of reconciling
income (expense) items:
Net gains (losses) on investments and
other financial instruments
0.25
(0.19
)
Loss on extinguishment of debt
(0.11
)
—
Impairment of goodwill
(0.02
)
—
Amortization and impairment of other
acquired intangible assets
(0.11
)
(0.06
)
Impairment of other long-lived assets
and other non-operating items
(0.04
)
(0.03
)
Income tax (provision) benefit on other
income (expense) items (1)
0.01
0.06
Difference between statutory and
effective tax rate (2)
0.01
0.30
Per-share impact of other income
(expense) items
(0.01
)
0.08
Adjusted diluted net operating income
per share (1)
$
3.21
$
2.69
(1)
Calculated using the company’s federal
statutory tax rate of 21%. Any permanent tax adjustments and state
income taxes on these items have been deemed immaterial and are not
included.
(2)
For 2018, includes $0.34 of tax benefit
related to the settlement of the IRS Matter, which includes both
the impact of the settlement with the IRS as well as the reversal
of certain related previously accrued state and local tax
liabilities.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 5 of 6)
Reconciliation of Return on
Equity to Adjusted Net Operating Return on Equity (1)
Year Ended December
31,
2019
2018
Return on equity (1)
17.8
%
18.7
%
Less impact of reconciling income
(expense) items: (2)
Net gains (losses) on investments and
other financial instruments
1.4
(1.3
)
Loss on extinguishment of debt
(0.6
)
—
Impairment of goodwill
(0.1
)
—
Amortization and impairment of other
acquired intangible assets
(0.6
)
(0.4
)
Impairment of other long-lived assets
and other non-operating items
(0.2
)
(0.2
)
Income tax (provision) benefit on
reconciling income (expense) items (3)
—
0.4
Difference between statutory and
effective tax rate (3)
—
2.0
Impact of reconciling income (expense)
items
(0.1
)
0.5
Adjusted net operating return on
equity
17.9
%
18.2
%
(1)
Calculated by dividing net income by
average stockholders’ equity.
(2)
As a percentage of average
stockholders’ equity.
(3)
Calculated using the company’s
federal statutory tax rate of 21%. Any permanent tax adjustments
and state income taxes on these items have been deemed immaterial
and are not included.
Radian Group Inc. and
Subsidiaries
Consolidated Non-GAAP Financial Measure
Reconciliations
Exhibit G (page 6 of 6)
Reconciliation of Net Income
to Services Adjusted EBITDA
Year Ended December
31,
(In
thousands)
2019
2018
Net income
$
672,309
$
606,011
Less reconciling income (expense)
items:
Net gains (losses) on investments and
other financial instruments
51,719
(42,476
)
Loss on extinguishment of debt
(22,738
)
—
Impairment of goodwill
(4,828
)
—
Amortization and impairment of other
acquired intangible assets
(22,288
)
(12,429
)
Impairment of other long-lived assets
and other non-operating items
(7,507
)
(6,404
)
Income tax (provision) benefit
(176,684
)
(78,175
)
Mortgage Insurance adjusted pretax
operating income
868,898
772,614
Services adjusted pretax operating
income (loss)
(14,263
)
(27,119
)
Less reconciling income (expense)
items:
Allocation of corporate operating
expenses to Services
(16,943
)
(11,974
)
Allocation of corporate interest
expense to Services
—
(17,805
)
Services depreciation and
amortization
(3,684
)
(3,564
)
Services adjusted EBITDA
$
6,364
$
6,224
On a consolidated basis, “adjusted pretax operating income,”
“adjusted diluted net operating income per share,” “adjusted net
operating return on equity” and “tangible book value per share” are
measures not determined in accordance with GAAP. “Services adjusted
EBITDA” and “Services adjusted EBITDA margin” are also non-GAAP
measures. These measures should not be considered in isolation or
viewed as substitutes for GAAP pretax income, diluted net income
per share, return on equity, book value per share or net income.
Our definitions of adjusted pretax operating income, adjusted
diluted net operating income per share, adjusted net operating
return on equity, tangible book value per share, Services adjusted
EBITDA or Services adjusted EBITDA margin may not be comparable to
similarly-named measures reported by other companies. See Exhibit F
for additional information on our consolidated non-GAAP financial
measures.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - New Insurance Written
Exhibit H
2019
2018
($ in
millions)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Total primary new insurance
written
$
19,953
$
22,037
$
18,539
$
10,900
$
12,737
Percentage of
primary new insurance written by FICO score (1)
>=740
66.3
%
64.1
%
62.2
%
57.6
%
54.6
%
680-739
30.5
31.5
32.5
34.7
35.8
620-679
3.2
4.4
5.3
7.7
9.6
Total primary new insurance
written
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary new insurance written
Borrower-paid
97.4
%
97.1
%
96.5
%
95.1
%
94.0
%
Percentage by
premium type
Direct monthly and other recurring
premiums
82.1
%
85.0
%
83.3
%
83.4
%
82.8
%
Direct single premiums (2):
Lender-paid
1.9
1.9
2.5
3.9
5.0
Borrower-paid (3)
16.0
13.1
14.2
12.7
12.2
Total primary new insurance
written
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary new insurance written for
purchases
67.5
%
80.7
%
89.8
%
92.2
%
94.9
%
Primary new insurance written for
refinances
32.5
%
19.3
%
10.2
%
7.8
%
5.1
%
Percentage by
LTV
95.01% and above
11.5
%
16.8
%
20.5
%
19.7
%
18.3
%
90.01% to 95.00%
35.8
37.4
38.1
40.9
43.1
85.01% to 90.00%
30.0
27.4
26.9
27.3
27.5
85.00% and below
22.7
18.4
14.5
12.1
11.1
Total primary new insurance
written
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
(1)
For loans with multiple borrowers, the
percentage of primary new insurance written by FICO score
represents the lowest of the borrowers’ FICO scores. All periods
prior to March 31, 2019 had previously been presented based on the
FICO score of the primary borrower and have been restated to
reflect the lowest of the borrowers’ FICO scores.
(2)
Percentages exclude the impact of
reinsurance.
(3)
Borrower-paid Single Premium Policies
have lower Minimum Required Assets under PMIERs as compared to
lender-paid Single Premium Policies.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Primary Insurance in Force and Risk in Force
Exhibit I (page 1 of 2)
December 31,
September 30,
June 30,
March 31,
December 31,
($ in millions)
2019
2019
2019
2019
2018
Primary insurance
in force (1)
Prime
$
235,742
$
232,086
$
225,443
$
218,227
$
215,739
Alt-A and A minus and below
4,816
5,072
5,313
5,507
5,704
Total Primary
$
240,558
$
237,158
$
230,756
$
223,734
$
221,443
Primary risk in
force (1) (2)
Prime
$
59,780
$
59,217
$
57,795
$
56,054
$
55,374
Alt-A and A minus and below
1,141
1,203
1,262
1,307
1,354
Total Primary
$
60,921
$
60,420
$
59,057
$
57,361
$
56,728
Percentage of
primary risk in force
Direct monthly and other recurring
premiums
72.4
%
72.0
%
71.2
%
70.6
%
70.3
%
Direct single premiums
27.6
%
28.0
%
28.8
%
29.4
%
29.7
%
Percentage of
primary risk in force by FICO score (3)
>=740
56.9
%
56.2
%
55.7
%
55.2
%
55.1
%
680-739
34.2
34.5
34.6
34.8
34.8
620-679
8.2
8.6
8.9
9.2
9.3
<=619
0.7
0.7
0.8
0.8
0.8
Total Primary
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by LTV
95.01% and above
14.2
%
13.9
%
13.2
%
12.2
%
11.6
%
90.01% to 95.00%
51.3
51.9
52.5
53.0
53.1
85.01% to 90.00%
27.9
27.9
28.2
28.6
29.0
85.00% and below
6.6
6.3
6.1
6.2
6.3
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Percentage of
primary risk in force by policy year
2008 and prior
7.8
%
8.4
%
8.9
%
9.6
%
10.1
%
2009
0.2
0.2
0.3
0.3
0.4
2010
0.2
0.2
0.2
0.3
0.3
2011
0.6
0.6
0.7
0.7
0.8
2012
2.3
2.5
2.9
3.3
3.7
2013
4.2
4.6
5.2
5.8
6.2
2014
4.3
4.8
5.3
5.8
6.1
2015
7.4
8.1
8.9
9.7
10.2
2016
12.5
13.5
14.8
16.0
16.8
2017
16.0
17.4
18.9
20.3
21.1
2018
17.9
19.7
21.8
23.5
24.3
2019
26.6
20.0
12.1
4.7
—
Total
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Primary risk in force on defaulted
loans
$
1,061
$
1,012
$
986
$
1,002
$
1,032
Table continued on next page.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Primary Insurance in Force and Risk in Force
Exhibit I (page 2 of 2)
Table continued from prior
page.
December 31,
September 30,
June 30,
March 31,
December 31,
2019
2019
2019
2019
2018
Persistency Rate (12 months
ended)
78.2
%
81.5
%
83.4
%
83.4
%
83.1
%
Persistency Rate (quarterly,
annualized) (4)
75.0
%
75.5
%
80.8
%
85.4
%
85.5
%
(1)
Excludes the impact of premiums ceded
under our reinsurance agreements.
(2)
Does not include pool risk in force or
other risk in force, which combined represent less than 1.0% of our
total risk in force for all periods presented.
(3)
For loans with multiple borrowers, the
percentage of primary risk in force by FICO score represents the
lowest of the borrowers’ FICO scores. All periods prior to March
31, 2019 had previously been presented based on the FICO score of
the primary borrower and have been restated to reflect the lowest
of the borrowers’ FICO scores.
(4)
The Persistency Rate on a quarterly,
annualized basis is calculated based on loan-level detail for the
quarter ending as of the date shown. It may be impacted by
seasonality or other factors, including the level of refinance
activity during the applicable periods, and may not be indicative
of full-year trends.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance (“MI”) Supplemental
Information - Claims and Reserves
Exhibit J
2019
2018
($ in
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Net claims paid: (1)
Total primary claims paid
$
24,267
$
28,981
$
31,940
$
33,360
$
35,175
Total pool and other
559
901
472
1,230
190
Subtotal
24,826
29,882
32,412
34,590
35,365
Impact of commutations (2)
3,691
6,812
15
—
4,356
Total net claims paid
$
28,517
$
36,694
$
32,427
$
34,590
$
39,721
Total average net primary claims paid
(1) (3)
$
50.9
$
47.0
$
50.1
$
48.6
$
52.0
Average direct primary claims paid (3)
(4)
$
52.1
$
48.1
$
51.1
$
49.2
$
52.9
(1)
Net of reinsurance recoveries.
(2)
Includes payments to commute mortgage
insurance coverage on certain performing and non-performing
loans.
(3)
Calculated without giving effect to the
impact of commutations.
(4)
Before reinsurance recoveries.
($ in thousands,
except primary reserve per
December 31,
September 30,
June 30,
March 31,
December 31,
primary default
amounts)
2019
2019
2019
2019
2018
Reserve for losses by category
(1)
Mortgage insurance ("MI")
reserves
Prime
$
248,727
$
236,382
$
242,378
$
240,489
$
242,135
Alt-A and A minus and below
91,093
95,723
104,863
111,955
119,553
IBNR and other (2)
40,920
42,117
33,888
13,008
13,864
LAE
8,918
9,000
9,070
8,994
10,271
Total primary reserves
389,658
383,222
390,199
374,446
385,823
Total pool reserves
11,322
10,605
10,816
10,621
11,640
Total 1st lien reserves
400,980
393,827
401,015
385,067
397,463
Other
293
260
279
294
428
Total MI reserves
401,273
394,087
401,294
385,361
397,891
Services reserves
3,492
4,054
3,984
3,423
3,470
Total reserves
$
404,765
$
398,141
$
405,278
$
388,784
$
401,361
1st lien reserve per default
Primary reserve per primary default
excluding IBNR and other
$
16,399
$
16,900
$
18,139
$
17,962
$
17,634
(1)
Includes ceded losses on reinsurance
transactions, which are expected to be recovered and are included
in the reinsurance recoverables reported in other assets in our
condensed consolidated balance sheets.
(2)
For the quarters ended September 30,
2019 and June 30, 2019, includes increases of $11.8 million and
$19.4 million, respectively, in the Company's IBNR reserve estimate
related to previously disclosed legal proceedings involving
challenges from certain servicers regarding loss mitigation
activities.
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Default Statistics
Exhibit K
December 31,
September 30,
June 30,
March 31,
December 31,
2019
2019
2019
2019
2018
Default
Statistics
Primary Insurance:
Prime
Number of insured loans
1,049,954
1,040,520
1,018,715
994,865
986,704
Number of loans in default
16,532
15,345
14,521
14,831
15,402
Percentage of loans in default
1.57
%
1.47
%
1.43
%
1.49
%
1.56
%
Alt-A and A minus
and below
Number of insured loans
30,439
32,163
33,609
34,763
35,906
Number of loans in default
4,734
4,839
5,122
5,291
5,691
Percentage of loans in default
15.55
%
15.05
%
15.24
%
15.22
%
15.85
%
Total Primary
Number of insured loans
1,080,393
1,072,683
1,052,324
1,029,628
1,022,610
Number of loans in default
21,266
20,184
19,643
20,122
21,093
Percentage of loans in default
1.97
%
1.88
%
1.87
%
1.95
%
2.06
%
Radian Group Inc. and
Subsidiaries
Mortgage Insurance Supplemental
Information - Reinsurance Programs
Exhibit L
2019
2018
($ in
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Quota Share
Reinsurance (“QSR”) and Single Premium QSR Programs
Ceded premiums written (1)
$
9,217
$
8,408
$
588
$
7,017
$
12,923
% of premiums written
3.0
%
2.9
%
2.2
%
2.7
%
4.8
%
Ceded premiums earned
$
19,428
$
19,295
$
29,212
(2)
$
15,676
$
15,726
% of premiums earned
6.1
%
6.3
%
8.7
%
5.5
%
5.6
%
Ceding commissions written
$
6,836
$
6,778
$
6,861
$
4,695
$
6,006
Ceding commissions earned (3)
$
12,055
$
12,153
$
16,353
(2)
$
8,685
$
7,718
Profit commission
$
17,792
$
18,346
$
26,476
(2)
$
11,318
$
10,638
Ceded losses
$
1,533
$
771
$
1,868
$
1,687
$
1,730
Excess-of-Loss
Program
Ceded premiums written
$
6,834
$
6,878
$
13,468
$
2,919
$
9,009
% of premiums written
2.2
%
2.4
%
4.8
%
1.1
%
3.3
%
Ceded premiums earned
$
7,104
$
7,452
$
7,662
$
3,265
$
2,305
% of premiums earned
2.2
%
2.4
%
2.3
%
1.2
%
0.8
%
Ceded RIF
(4)
QSR Program
$
644,512
$
702,201
$
768,554
$
840,621
$
910,862
Single Premium QSR Program
8,582,067
8,538,363
8,495,651
8,267,506
8,168,939
Excess-of-Loss Program
850,800
974,800
1,017,440
454,641
455,440
Total Ceded RIF
$
10,077,379
$
10,215,364
$
10,281,645
$
9,562,768
$
9,535,241
PMIERs impact -
reduction in Minimum Required Assets (5)
QSR Program
$
35,382
$
38,227
$
41,873
$
45,477
$
48,734
Single Premium QSR Program
511,695
513,832
516,468
507,656
522,318
Excess-of-Loss Program
738,386
834,072
926,640
454,641
455,440
Total PMIERs impact
$
1,285,463
$
1,386,131
$
1,484,981
$
1,007,774
$
1,026,492
(1)
Net of profit commission.
(2)
Includes a cumulative adjustment to
unearned premiums related to an update to the amortization rates
used to recognize revenue for Single Premium Policies.
(3)
Includes amounts reported in policy
acquisition costs and other operating expenses. Operating expenses
include the following ceding commissions, net of deferred policy
acquisition costs, for the periods indicated:
2019
2018
($ in
thousands)
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Qtr 4
Ceding commissions
$
(7,973
)
$
(8,160
)
$
(12,408
)
$
(5,643
)
$
(5,837
)
(4)
Included in primary RIF.
(5)
Excludes the impact of intercompany
reinsurance.
FORWARD-LOOKING STATEMENTS
All statements in this report that address events, developments
or results that we expect or anticipate may occur in the future are
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, Section 21E of the Securities Exchange
Act of 1934 and the U.S. Private Securities Litigation Reform Act
of 1995. In most cases, forward-looking statements may be
identified by words such as “anticipate,” “may,” “will,” “could,”
“should,” “would,” “expect,” “intend,” “plan,” “goal,”
“contemplate,” “believe,” “estimate,” “predict,” “project,”
“potential,” “continue,” “seek,” “strategy,” “future,” “likely” or
the negative or other variations on these words and other similar
expressions. These statements, which may include, without
limitation, projections regarding our future performance and
financial condition, are made on the basis of management’s current
views and assumptions with respect to future events. Any
forward-looking statement is not a guarantee of future performance
and actual results could differ materially from those contained in
the forward-looking statement. These statements speak only as of
the date they were made, and we undertake no obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. We operate in a
changing environment where new risks emerge from time to time and
it is not possible for us to predict all risks that may affect us.
The forward-looking statements, as well as our prospects as a
whole, are subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in the
forward-looking statements. These risks and uncertainties include,
without limitation:
- changes in economic and political conditions that impact the
size of the insurable market, the credit performance of our insured
portfolio, and our business prospects;
- changes in the way customers, investors, ratings agencies,
regulators or legislators perceive our performance, financial
strength and future prospects;
- Radian Guaranty Inc.’s ("Radian Guaranty") ability to remain
eligible under the Private Mortgage Insurer Eligibility
Requirements (the "PMIERs") and other applicable requirements
imposed by the Federal Housing Finance Agency ("FHFA") and by
Fannie Mae and Freddie Mac (collectively, the “GSEs”) to insure
loans purchased by the GSEs, including potential future changes to
the PMIERs which, among other things, may be impacted by the
general economic environment and housing market, as well as the
proposed Conservatorship Capital Framework ("CCF") that would
establish capital requirements for the GSEs, if the CCF is
finalized;
- our ability to successfully execute and implement our capital
plans, including our risk distribution strategy through the capital
markets and reinsurance markets, and to maintain sufficient holding
company liquidity to meet our liquidity needs;
- our ability to successfully execute and implement our business
plans and strategies, including plans and strategies that require
GSE and/or regulatory approvals and licenses;
- our ability to maintain an adequate level of capital in our
insurance subsidiaries to satisfy existing and future regulatory
requirements;
- changes in the charters or business practices of, or rules or
regulations imposed by or applicable to the GSEs, which may include
changes in the requirements to remain an approved insurer to the
GSEs, the GSEs’ interpretation and application of the PMIERs, as
well as changes impacting loans purchased by the GSEs, such as
whether GSE eligible loans meet the "qualified mortgages" (QM) loan
requirements under applicable law, requirements regarding mortgage
credit and loan size and the GSEs' pricing;
- changes in the current housing finance system in the U.S.,
including the role of the Federal Housing Administration (the
“FHA”), the GSEs and private mortgage insurers in this system;
- uncertainty from the expected discontinuance of LIBOR and
transition to any other interest rate benchmark that could cause
interest rate volatility and, among other things, impact our
investment portfolio, cost of debt and cost of reinsurance through
insurance-linked notes transactions;
- any disruption in the servicing of mortgages covered by our
insurance policies, as well as poor servicer performance;
- a decrease in the "Persistency Rates" (the percentage of
insurance in force that remains in force over a period of time) of
our mortgage insurance on monthly premium products;
- competition in our mortgage insurance business, including price
competition and competition from the FHA and U.S. Department of
Veterans Affairs as well as from other forms of credit enhancement,
including GSE sponsored alternatives to traditional mortgage
insurance;
- the effect of the Dodd-Frank Wall Street Reform and Consumer
Protection Act on the financial services industry in general, and
on our businesses in particular, including future changes to the QM
loan requirements, which currently are subject to an Advanced
Notice of Proposed Rulemaking (ANPR) issued by the Consumer
Financial Protection Bureau;
- legislative and regulatory activity (or inactivity), including
the adoption of (or failure to adopt) new laws and regulations, or
changes in existing laws and regulations, or the way they are
interpreted or applied;
- legal and regulatory claims, assertions, actions, reviews,
audits, inquiries and investigations that could result in adverse
judgments, settlements, fines, injunctions, restitutions or other
relief that could require significant expenditures, new or
increased reserves or have other effects on our business;
- the amount and timing of potential settlements, payments or
adjustments associated with federal or other tax examinations;
- the possibility that we may fail to estimate accurately the
likelihood, magnitude and timing of losses in establishing loss
reserves for our mortgage insurance business or to accurately
calculate and/or project our Available Assets and Minimum Required
Assets under the PMIERs, which will be impacted by, among other
things, the size and mix of our insurance in force, the level of
defaults in our portfolio, the level of cash flow generated by our
insurance operations, and our risk distribution strategies;
- volatility in our financial results caused by changes in the
fair value of our assets and liabilities, including our investment
portfolio;
- potential future impairment charges related to our goodwill and
other acquired intangible assets;
- changes in “GAAP” (accounting principles generally accepted in
the U.S.) or “SAPP” (statutory accounting principles and practices
including those required or permitted, if applicable, by the
insurance departments of the respective states of domicile of our
insurance subsidiaries) rules and guidance, or their
interpretation;
- our ability to attract and retain key employees; and
- legal and other limitations on amounts we may receive from our
subsidiaries, including dividends or ordinary course distributions
under our internal tax- and expense-sharing arrangements.
For more information regarding these risks and uncertainties as
well as certain additional risks that we face, you should refer to
the Risk Factors detailed in Item 1A of our Annual Report on Form
10-K for the year ended December 31, 2018, and to subsequent
reports and registration statements filed from time to time with
the U.S. Securities and Exchange Commission. We caution you not to
place undue reliance on these forward-looking statements, which are
current only as of the date on which we issued this report. We do
not intend to, and we disclaim any duty or obligation to, update or
revise any forward-looking statements to reflect new information or
future events or for any other reason.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200205005887/en/
Emily Riley - Phone: 215.231.1035 email:
emily.riley@radian.biz
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